I recently started using the Stash Invest app at the suggestion of a good friend. I'm no stranger to investing, but I thought the idea of micro-investing was a good one that could be easily implemented from week to week as opposed to larger one-time investments. Plus, I liked the ease of enrollment and the funds options.
In the process, I also joined a closed Facebook group for Stash investors to be part of the community of investors. And that's when things got interesting. A lot of people seem to want their piece of the rising stock market and the related big returns - quickly. It's the classic need for instant gratification at work. They obsessively hawk every daily up and down of their account, regardless of whether or not they have $50 or $5,000 invested. Much like with housing market leading up to the Great Recession, a lot of people have "forgotten" that stock markets are subject to ups and downs; there is zero guarantee on your return.There seems to be some fundamentally flawed perspectives on investing and I wanted to speak on it.
Unlike the savings in your normal bank account or money market, investing is and has always been a game of risk. You are throwing your money into the pool and hoping your selection of stocks, mutual funds, bonds or otherwise will do well over the long-term. Keyword: LONG-TERM. If you want to make quick money, there's a term for that in the investing world: day traders. Or short-sellers. They get in there, and buy/sell on the quick. This group of individuals tend to have tons of capital available to make it worthwhile. This is not most of us (myself included).
Seeing so many people obsess over their gains and get antsy (or completely pull out) when they have losses is crazy to me. They're missing the whole point of investing.
So let me keep it real right now:
1. If you can't stand the heat, stay out of the kitchen. Getting scared at every turn will never result in the gains you want. True investing takes time and consistency. Perhaps you don't have the stomach for actively being in the market.
2. Buying the dip is a good strategy if you are able, but slow and steady wins the race. Dollar-cost averaging is what works here. Investing consistently every week or every other week helps average out the good with the bad.
3. Getting emotional about your money will inevitably end in losses. Honestly, checking your account once a week is plenty. You don't need to hawk it all day every day, only to get yourself all worked up. Who needs THAT kind of stress?
4. Go for high dividend, low expense ratio percentage funds. There's a lot of speculative investments out there, and there may be big gains in new industries. But make sure you have the stomach for the kind of volatility. You want a no-brainer option? Choose funds that pay you as a shareholder regularly. Avoid funds with high expense ratio percentages (the amount you have to pay upon sale of your investment). Why give away your gains in unnecessary fees?
I wish people really understood about what it takes mentally to be an investor. It is why a lot of rich people with stocks and bonds continue to be rich. They don't falter when the market takes a turn (in fact, they often treat it as a buying opportunity), and they let their money work for them. It's the true difference between being rich and being poor.
Be patient. Be consistent. Don't quit impulsively. Choose investments wisely. And let your money work for you.
